US government pursues pharma on patent agreements

FTC steps up scrutiny of pharmaceutical industry business practices

The US Federal Trade Commission (FTC) appears to be stepping up its scrutiny of the pharmaceutical industry's business practices, particularly of the way it handles patent rights.

In the first of two actions, the FTC has filed a petition with the US District Court of New Jersey to maintain that agreements by branded company not to launch an authorised generic is a "convenient method" to pay generic firms to delay their entry into the market.

The briefing document cites an ongoing antitrust case brought by the FTC against Wyeth (now part of Pfizer) and Teva over a scenario in which Wyeth allegedly agreed not to launch an authorised generic of its Effexor XR (venlafaxine) antidepressant.

The suit claims that in so doing, Wyeth was effectively rewarding Teva - which had first-to-file market exclusivity for generic Effexor XR - with a period of monopoly for its product. The FTC says the 2005 agreement meant that Teva delayed its own product launch in return.

These so-called 'pay-for-delay' deals have been in the FTC's sights for some time, and opponents of the practice won an important legal round last month when an appeals court ruled that the transactions are anti-competitive.

It also concluded that payments by branded drugmakers to generic firms are "prima facie evidence of an unreasonable restraint of trade".

That case was brought by wholesalers and retailers against Schering-Plough (now part of Merck & Co) and generics firms Upsher-Smith and ESI, which had agreed such a deal relating to Schering-Plough's K-Dur (potassium chloride) product.

At the time, FTC chairman Jon Leibowitz said that restricting pay-for-delay deals would "reduce federal government debt by $5bn over 10 years".

Exclusive licenses

In the second action, the FTC wants to change US pre-merger notification rules to make notification of federal authorities mandatory when pharma companies are involved in the licensing of exclusive patent rights, with a waiting period before any such transaction is completed.

The aim is to allow the FTC and the Department of Justice to gauge whether the transfer of such rights is anti-competitive under the US Hart Scott Rodino (HSR) antitrust legislation.

"The pharmaceutical industry presents unique incentives for the use of exclusive licenses," says the FTC's proposal document, adding that these agreements are "unlike that seen in any other industry".

The FTC is accepting public comment on the proposals until October 25, 2012.